***Aplos now offers FREE e-Filing for Form 990-N (e-Postcard). Click here for more!***
Many people may have not even received their personal tax refund or worse yet just paid their tax bill, when the nonprofit’s tax form is due…the dreaded Form 990 (or some variation of it). For most nonprofit’s, this form is due 5 months and 15 days after the calendar year end…which makes it due on May 15th.
If you need more time to file, your nonprofit can file an extension request with Form 8868.
Requirements: Each request must be for a single organization and must be for a full tax year (not a short year). In most cases, you will file for an automatic 3-month extension. If this is the case, you only need to fill out Part 1. If you need more time, you must fill out Part II of Form 8868 as well.
The extension is simple to complete and is only two pages. The most difficult part is estimating the tax liability (if your nonprofit has any unrelated business income UBIT). The IRS only grants an extension for the tax form, any taxes owed are still due by May 15 and Form 990-T must be completed.
Question number 3 requires the preparer to fill in a tentative tax amount less credits. The difference is the tax due and must be paid by May 15th. If the tax due is underestimated, the nonprofit will be charged interest and penalty on the underpayment by the IRS. You may be saying, “If I knew what the tax was, I wouldn’t need an extension!” We sympathize. One way to estimate the tax is to start with last year’s tax due (Form 990-T). Estimate any difference based on the current year’s activity. There are many items to consider that could make that estimate greatly vary form the prior year such as higher or lower unrelated business income, higher tax rates, and prepaid tax amounts.
You will need to briefly explain why Form 990 cannot be filed in a timely manner. The IRS will not approve applications that only list “illness” or “CPA too busy.” Give a more detailed explanation.
Filing Form 8868 maybe necessary to put the nonprofit’s financial data in order. If you then properly file the report by the new due date (August 15th) and pay the balance due by May 15th, filing for an extension will not jeopardize your nonprofit’s tax exempt status. Remember the quickest way to lose your nonprofit status is by NOT filing your tax forms in a timely manner.
The extension (Form 8868) must be postmarked by the nonprofit’s tax return due date (normally May 15th). The instructions for this form can be found on Page 3 after the Form 8868. Don’t forget to sign it and keep a copy for yourself.
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This blog is meant to be informative and should not be construed as tax advice. Always consult a CPA or trusted professional if you seek tax or accounting advice.